When you have your own business, you have to put a price on your products and services so that people can buy them.
But before you can figure out the price, you also need to figure out the value of what each item is worth.
It’s also important to note that prices and values are really just made up numbers. It’s what the business owner, the seller, or whoever else is involved thinks they could be paid for their product or service.
According to the Dictionary, value is:
1. estimate the monetary worth of (something).
"his estate was valued at $45,000"
According to the Dictionary, price is:
1. the amount of money expected, required, or given in payment for something.
"land could be sold for a high price"
The difference between the two is the estimated worth versus the expected or required amount for something.
In business, we use both value and price.
The value shows potential buyers what the product or service could cost. The price is the actual cost that someone will be paid for their product or service.
When you go to a sales page for any online business owner, many times you will find a part of the sales page that looks like this:
This is where the business owner lists out all of the things that are in a specific product or course or even a service and tells you what their perceived value of each item is.
Each item on the list could be worth the estimated value of what is stated. But that doesn’t mean it’s the price or cost of each item. You also usually will not be able to buy each item on the list separately. They are only available all together in the single product.
Value vs Price for Products
When you sell a product or a course, it is something that you create once and sell multiple times.
Yes, there may be access to you as the creator of the product or course and you would add that to your price accordingly.
But looking at that list of items and their perceived value, why would I actually charge the perceived value of each item for this product?
I created everything once.
Everyone who buys the toolkit gets the same exact thing. I’m not creating something new every time a new buyer makes a purchase.
Are products worth less?
Not at all! But you can charge less.
There is much less time involved in a product. Yes, it will take a fair chunk of time in the beginning to create all of the assets for your product.
But you only have to create everything once.
Whereas with a service, you are working with each buyer in a 1 to 1 (usually) capacity. They get your undivided attention for a certain period of time.
A product you create once and sell over and over again. So you can actually charge less and make more money.
A product is easier to scale
When you only create a product once, and then you don’t spend much more time on it, it’s so much easier to scale, meaning you can make a lot more money from it.
You can spend more time on marketing the product, and therefore, selling a lot more of the product, which increases your revenue.
With a service, you can’t scale this same way because your time is specifically involved, so the more you sell, the more of your time is taken up.
Whereas, with a product, the more you sell, you aren’t giving away more of your time. Much easier to scale a product and make money.
Value vs Price for Services
As mentioned above, services can (and should, at least IMO) be priced much higher than a product.
With a service, you are working with someone in a 1 to 1 capacity. The buyer gets your undivided attention while you work together.
In this aspect, it’s not always easy, or even feasible, to list the value of what you get with a service.
Many times, you won’t see a value listed when it comes to services, you’ll only see the cost.
Do you need to show the value?
Of course not. You could just list the actual price of the product.
But one of my personal favorite topics is buyer psychology. I personally list the value of the items in my products because I like to.
Not every business owner does this. And that’s okay. They don’t have to.
But the most important point that needs to be observed here is that price is the cost, what someone is going to pay and value is the estimated worth.
Both are used in online marketing. Both don’t have to be used.
Value speaks more to the buyer psychology brain of a human, while the price is what someone pays.
It’s also important to note that not everyone perceives the value of everything the same.
Real life examples of value vs price
Let’s look at a few other examples, things you probably encounter in your everyday life.
In the store, you are not going to see the value of something posted like you do on a sales page for an online product. But you will see price comparisons.
Take medicines for example.
How can a name brand item, something that comes from Pfizer cost $350, when the generic brand that is sold under the store name or a low cost brand only be $20?
The biggest thing is the brand name.
The 2 different medicines are the exact same thing. They have the same ingredients, they do the same job, but yet their price is radically different. Why?
Because that is what the seller deems the value of the product to be.
Is the medicine from Pfizer that much more effective than the generic brand? Not at all. They do the same job.
Or let’s look at some food.
You have Jif brand peanut butter and you have the store brand. Where I live, that’s Giant. But you could have HEB, Kroger, Publix, Weis or any other store brand where you live.
The Jif peanut butter costs $10 a jar. The store brand peanut butter costs $5 a jar.
Why such a difference?
They are made with the exact same ingredients. Many times they are made in the same factory, just a different label is slapped on the jar.
The difference? The brand name. Jif costs more simply because of the name Jif. Giant costs less because it’s the store brand.
But when you look at the prices in the store, you perceive the value of Jif to be better simply because it costs more.
Nothing wrong with that.
It’s your perception for which you think is better. You may think one is better than the other. Joe may like the other one better. And Susie is going to come up and say that something else entirely is better.
Again, there is nothing wrong with any of these perceptions and choices. That’s why there are so many brands that create the same or similar products.
In the examples above, you can see that the prices are radically different. We don’t know the value because they aren’t always posted.
But each business has the right and ability to price and value things as they see fit.
Does that mean that you, as the consumer, need to see the price and value as the same?
Absolutely not. But what you see as the price and value will not change the price that you pay, or the value the business owner sees for their product or service. Either you pay the price that is asked or you walk away. It’s that simple.
Pricing based on your competitors
Do you need to price similar or the same as your competitors?
Not at all.
The price and value that your competitors see can be completely different from yours. And that’s okay. There is nothing wrong with everyone seeing a different value or price for the items they sell.
The people who buy from you like what you have to offer. They like the way you teach. They like what you are selling.
Can I charge more than I do?
Probably. But I like my prices the way they are, for right now. I can and will change my prices whenever I want to.
When I put a price on my products and services, I sit with the thing I’m offering and feel the number that I should be charging. And that just feels right to me.
Doesn’t feel right to you? Then that’s how you feel. You are not the one who is selling it or standing behind the product or service.
I am in alignment with the prices I charge.
Value vs Price: Which do you use?
Obviously you are always going to use the price as a business owner. The price is what someone is paying you.
The value is what you, or even someone else, deems the items to be worth. It doesn’t mean that’s what you have to charge.
Every single business has the ability to price their products and services however they want.
If I want to put a price of $37 for one of my products and $1997 for another one, then that’s what feels right to me. If what I am selling actually speaks to you and it’s something you want, the price you pay will not matter one little bit.
You’ll find your credit card and you’ll get it out when you want what is actually being offered, no matter what the cost. If you don’t want it, then you’ll just walk away.